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  • New Tax Holiday
Newsletter:

New Tax Holiday

18 April 2018

New Tax Holiday

The Minister of Finance (MoF) has issued Regulation No. 35/PMK.010/2018 (PMK-35) effective on 4 April 2018 which regulates to simplify the procedures for applying the tax holiday facility. PMK-35 revokes previous MoF Regulation No. 159/PMK.010/2015 as amended by MoF Regulation No. 103/PMK.010/2016. There are a number of important changes to note as follows:

1.Under the old regulation, the tax holiday was granted to new investors only, while under the new regulation, new investors as well as current investors that want to expand their businesses can also apply.

2. Under the old regulation, the approval from Ministry of Finance requires 125 working days, while under the new regulation, the approval will only take 5 working days upon receipt of complete proposal from Indonesia Investment Coordinating Board.

3. Under the old regulation, the range for the tax holiday was between 10 to 100 percent, while under the new regulation, there is only one rate of 100 percent applied across the board.

4. Under the old regulation, the tax holiday was given for a period of 5, 10, or 15 years, while under the new regulation, the period for the tax holiday is based on the value of the investment.

The period of reduction of corporate income tax shall be granted under the following conditions:

       a. 5 fiscal years for new investments with an investment plan value of at least IDR 500 billon and a maximum of less than IDR 1 trillion;

       b. 7 fiscal years for new investments with an investment plan value of at least IDR 1 trillion and a maximum of less than IDR 5 trillion;

      c. 10 fiscal years for new investments with an investment plan value of at least IDR 5 trillion and a maximum of less than IDR 15 trillion;

      d. 15 fiscal years for new investments with an investment plan value of at least IDR 15 trillion and a maximum of less than IDR 30 trillion; and

      e. 20 fiscal years for new investments with an investment plan value of at least IDR 30 trillion.

5. After the period of reduction of Corporate Income Tax expires, the Taxpayer (i.e. company) shall be given a reduction of Corporate Income Tax of 50% of the Income Tax owed as a transition period for additional 2 fiscal years.

6. The 17 pioneer industries in the business sectors are as follows:

a. integrated upstream base metal industry (non-steel and steel) with or without derivatives;

b. integrated industrial refining and / or refining of oil and gas with or without derivatives;

c. integrated petrochemical industry based on petroleum, natural gas, or coal with or without derivatives;

d. integrated inorganic base chemical industry with or without derivatives;

e. integrated organic basic chemical industry derived from agricultural, plantation, or forestry with or without derivatives;

f. integrated pharmaceutical raw materials industry with or without derivatives;

g. semi-conductor manufacturing industry and other key computer components such as wafer semiconductors, backlight for Liquid Crystal Display (LCD), electrical drivers, or Liquid Crystal Display (LCD) integrated with computer manufacturing industry;

h. key components of communications equipment such as wafer semiconductors, backlight for Liquid Crystal Display (LCD), electrical drivers, or Liquid Crystal Display (LCD) integrated with mobile phone manufacturing industry;

i. key components of health equipment integrated with irradiation, electromedical or electrotherapy manufacturing industry;

j. key components of industrial machinery such as electric motors or internal combustion motors integrated with machinery manufacturing industry;

k. key components of machinery such as piston, cylinder head, or cylinder block integrated with motor vehicle manufacturing industry;

l. robotic components integrated with manufacturing industry;

m. key components of ships integrated with shipbuilding industry;

n. key components of aircrafts such as engines, propellers, rotors or structural components integrated with aircraft manufacturing industry;

o. key components of trains such as engines or transmissions integrated with train manufacturing industry;

p. power plant machinery industry, including the garbage power plant industry; or

q. economic infrastructure.

The details of the business fields and types of production from each of the Pioneer Industry scope are stipulated under the Regulation of the Indonesia Investment Coordinating Board.

BDO INDONESIA PROVIDES A FULL SPECTRUM OF TAX AND BUSINESS ADVISORY SERVICES TO LOCAL ENTERPRISES, PUBLIC-LISTED COMPANIES, MULTI-NATIONAL COMPANIES AND INDIVIDUALS.”

 

IRWAN KUSUMANTO                                  

Tax Managing Director

ikusumanto@bdo.co.id          

 

BUDI PRASONGKO

Associate Director of Tax

bprasongko@bdo.co.id